Power Corporation of Canada ('Power', 'Power Corporation' or 'PCC') (TSX: POW) and Power Financial Corporation ('Power Financial' or 'PFC') (TSX: PWF) today announced the execution of a definitive agreement to effect a reorganization transaction (the 'Reorganization') pursuant to which each common share of PFC ('PFC Common Shares' or 'Power Financial Common Shares') held by holders of PFC Common Shares other than PCC and certain of its affiliates (the 'PFC Minority Shareholders' or 'Power Financial Minority Shareholders'), will be exchanged for 1.05 subordinate voting shares of PCC ('PCC Subordinate Voting Shares' or 'Power Corporation Subordinate Voting Shares') and $0.01 in cash.
Upon completion of the Reorganization, PCC will own all of the PFC Common Shares, while PFC preferred shares and debt securities will remain outstanding.
The Reorganization will simplify the group's corporate structure and serve as the foundation and catalyst for a broader set of strategic initiatives expected to deliver further value to shareholders. The Boards of Directors of PCC and PFC each have unanimously approved the Reorganization and the Board of Directors of PFC (the 'PFC Board'), based on the unanimous recommendation of the Special Committee (as defined below), has agreed to unanimously recommend that PFC Minority Shareholders vote in favour of the Reorganization.
After 23 years as Co-Chief Executive Officers of PCC, Paul Desmarais, Jr. and Andre Desmarais have decided to retire from their roles. They will continue to play an active role in the governance of PCC and maintain their positions as Chairman and Deputy Chairman, respectively, of PCC's Board of Directors. They were appointed to their roles in 1996 and have overseen a period of dramatic growth and value creation for PCC, PFC and the companies in the group. Since their appointment, the annualized Total Return to Shareholders, including dividends and capital appreciation, has been 11.7% and 13.1% for each of PCC and PFC, respectively, compared to 7.7% for the S&P TSX Composite index. The Board of Directors of PCC has indicated that it will appoint R. Jeffrey Orr, current President and Chief Executive Officer of PFC, as President and Chief Executive Officer of PCC upon completion of the Reorganization. 'Jeff has been instrumental in building and strengthening PFC's businesses for almost two decades, and we look forward to continuing to work with him to execute our shared vision of creating shareholder value in the financial services industry,' said Paul Desmarais Jr., PCC Chairman and Co-CEO. 'The Reorganization is a natural step that reflects our evolution from a diversified holding company into one that is primarily focused on financial services,' said Andre Desmarais, PCC Deputy Chairman and Co-CEO. 'Simplifying our corporate structure will make it easier to understand and value PCC appropriately,' said R. Jeffrey Orr, PFC President and CEO. 'At the same time, the more targeted strategy will allow us to better focus our investments and our efforts to create and return value to shareholders. I am excited to be a part of this new chapter of PCC's storied history.'
About Power Corporation
Power Corporation of Canada is a diversified international management and holding company with interests in companies in the financial services, asset management, sustainable and renewable energy, and other business sectors in North America, Europe and Asia. To learn more, visit www.PowerCorporation.com. As of the date hereof, PCC beneficially owns 425,402,926 PFC Common Shares representing approximately 64% of the issued and outstanding PFC Common Shares. In connection with the Reorganization, PCC will acquire 238,693,580 PFC Common Shares, based on the number of PFC Common Shares outstanding as of the date hereof, such that, immediately following the effective time of the Reorganization, PCC will beneficially own 664,096,506 PFC Common Shares, representing 100% of the issued and outstanding PFC Common Shares. Based on the closing price of the PCC Subordinate Voting Shares on December 12, 2019, PCC expects the aggregate value of the consideration it will pay pursuant to the Reorganization to be $8.0 billion.
Certain statements in this news release, other than statements of historical fact, are forward-looking statements based on certain assumptions and reflect PCC's and PFC's current expectations with respect to disclosure regarding PCC and PFC, respectively. Forward-looking statements are provided to present information about management's current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes. These statements include, without limitation, statements regarding the anticipated benefits of the Reorganization, PCC's intention to undertake further initiatives, the anticipated timing of mailing the Meeting Materials and the Offer, the timing of the completion of the Reorganization and the Offer, the timing for the receipt of the required regulatory, court and shareholder approvals, the receipt of Pansolo Holding Inc.'s written consent to the issuance of the PCC Subordinate Voting Shares, Pansolo Holding Inc.'s intention with respect to the PreEmptive Right and its interest in PCC following the Reorganization and the Pre-Emptive Right, the interest of PFC Minority Shareholders in PCC following the Reorganization and the Pre-Emptive Right, the number of PCC Subordinate Voting Shares and Participating Preferred Shares to be issued, the number of PCC Subordinate Voting Shares to be received by Directors and officers of PCC, the composition of the PCC Board of Directors and management team following closing of the Reorganization, the timing and amount of dividend payments, the delisting of the PFC Common Shares, PFC's status as a reporting issuer, PCC's and PFC's intention to redeem First Preferred Shares, the source of funds for such redemptions and the associated annual reduction in financing costs, the intention regarding First Preferred Shares not redeemed, the expected timing and size of the NCIB and the effect of the Reorganization on PCC's and PFC's future operations, financial conditions and share price performance. By its nature, this information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which are beyond PCC's and PFC's and their respective subsidiaries' control, affect the operations, performance and results of PCC and PFC and their respective subsidiaries and businesses, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in North America and internationally, fluctuations in interest rates, inflation and foreign exchange rates, monetary policies, business investment and the health of local and global equity and capital markets, management of market liquidity and funding risks, risks related to investments in private companies and illiquid securities, risks associated with financial instruments, changes in accounting policies and methods used to report financial condition (including uncertainties associated with significant judgments, estimates and assumptions), the effect of applying future accounting changes, business competition, operational and reputational risks, technological changes, cybersecurity risks, changes in government regulation and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, PCC's and its subsidiaries' ability to complete strategic transactions, integrate acquisitions and implement other growth strategies, the Reorganization not occurring as expected, including failure of any condition to the Reorganization, or the failure to achieve the anticipated benefits of the Reorganization, PCC's inability to issue PCC Subordinate Voting Shares or Participating Preferred Shares in the intended manner, Pansolo Holding Inc. changing its intention with respect to the exercise of the Pre-Emptive Right and subscribing for the number of Participating Preferred Shares to be acquired by Pansolo Holding Inc. on the exercise of the Pre-Emptive Right, the ability for PCC or PFC to redeem First Preferred Shares, the market for the PCC Subordinate Voting Shares and the Participating Preferred Share at the completion of the Reorganization, the ability for PCC to increase dividend payments based on financial and other conditions, the ability of PCC to effect purchases under the NCIB and PCC's or PFC's and their respective subsidiaries' success in anticipating and managing the foregoing factors. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements. Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, that the required approvals for the Reorganization will be received, as well as other considerations that are believed to be appropriate in the circumstances, including that the list of factors in the previous paragraph, collectively, are not expected to have a material impact on PCC or PFC's and their respective subsidiaries. While PCC and PFC each consider these assumptions to be reasonable based on information currently available to management, they may prove to be incorrect. Other than as specifically required by applicable Canadian law, PCC and PFC undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise. Additional information about the risks and uncertainties of PCC's and PFC's business and material factors or assumptions on which information contained in forward-looking statements is based is provided in its disclosure materials, including each of their most recent Management's Discussion and Analysis and Annual Information Form, filed with the securities regulatory authorities in Canada and available at www.sedar.com.